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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Crude Oil Outlook: The Market Rebounds and Oil Follows

Article By: ,  Market Analyst
August 6, 2024 11:58 AM
  • The broader market rebounds, oil follows
  • Middle East tensions are increasing speculation on oil trades
  • Positive economic activity in the services sector halted the market’s price drop
  • Crude oil inventories are in focus tomorrow after a 5-week streak of declining inventories

With the VIX recording historical highs, investor attention shifts towards opportunities to buy the dips, forecasting an upcoming reversal for the sharp market drops.

The exhausted bearish momentum yesterday met a greater-than-expected reading for the ISM Services PMI, which was previously retesting 2020 levels, supporting a halt and a positive rebound for the market drops.

The next question is whether the latest rebound is sustainable or just a correction along the downtrend.

Calls for an emergency rate cut to avoid a potential recession in the US are making headlines, adding further bearish pressures on the US dollar index. However, escalating tensions in the Middle East could revive the role of the dollar as a safe haven asset and boost its positive trends again alongside that of oil.

Beyond the state of US economic growth, US crude oil inventories will be in the headlines tomorrow after recording greater-than-expected results in negative inventory territory throughout July.

Technical Outlook

Crude Oil Outlook: USOIL – 3 Day Timeframe – Log Scale

Source: Tradingview

Breaking below the 5-wave triangle, oil entered a bearish territory and retested the 2024 starting point. Given the higher-than-expected ISM Services PMI along with escalating tensions in the Middle East, upward trends can be seen on the oil charts back towards levels 76.30, 77.80, and 79.40, provided it closes back in the triangle above 75.

Continuing through the bearish track and closing below 69, the next projected levels for oil can align with levels 65.60 and 60.60, respectively.

 

--- Written by Razan Hilal, CMT

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